The market reacted to the IMF’s announcement of a preliminary agreement by placing Salvadoran issues with the highest rises in emerging markets.
El Salvador’s bond price rebounded strongly on Wednesday after the announcement by the International Monetary Fund (IMF) about apreliminary agreement to implement a tax program,The market has been expected for three years.
Prices compiled by Bloomberg indicate that bonds due in 2052 rose from $0.026 to the start of the session to $0.84 in the morning of August 7, the largest increase in more than a month.
The president of El Salvador, Nayib Bukele, also shared a sheet with the emissions of emerging economies, where the note due for 2034 of El Salvador is placed in the preferencestop. That is, it reports the biggest rises and purchase options by investors.
At Wednesday’s session, still under caution after a strong one on Monday over fear of a recession in the U.S. The papers with maturity for 2032 issued by El Salvador earned between 2.5 % and 3 %.
Papers with maturity for 2035 earned between 0.27 % and 3 %, while those of 2027 ranged from 1.24 % and 2.06 %.
The 2025 issues, which are the next dues, report a softer dynamism, with gains between 0.50 percent and 0.53 percent. These papers must be paid on January 30, 2025, the balance of which is $99.61 million after the government realized abuyback last Aprilfor $248.3 million.
Optimism by the IMF
The dynamism of the market is tied up with the IMF’s announcement on Tuesday of a preliminary agreement to implement a fiscal adjustment of 3.5 percent of gross domestic product (GDP) for three years.
In a note, IMF noted that the programme will be aimed at strengthening public finances, as well as increased bank reserves, improving governance and transparency. And, the subject in discord since 2021, mitigate the risks of bitcoin in the economy.
For a long time we have maintained the view that an agreement should be reached (…) The statement clearly points to a change in the winds in favor of this expectation, and shows that the parties are close to a final agreement, which should be finalized soon,” Bloomberg quotes JPMoran Chase & Co analysts.
The market has expected the deal since 2020, although talks were confirmed in March 2021 for a program of up to $1.3 billion. At that time, the talks with the IMF, whose wholesale partner is the US. The U.S. stalled for the dismissal of the judges of the Supreme Court of Justice and the Attorney General, as well as the approval of bitcoin as a legal tender currency.
In the last debt issue, held in April 2024 for $1,000 million to a coupon of 12 %, the government of Nayib Bukele committed to investors to reach an agreement with the IMF or to improve El Salvador’s sovereign rating by two degrees by two degrees with the agencies (Moodys, Fitch and S&P) by October 2025. If he doesn’t comply,the payment of interest on that debt will increase by 4 %.
This article has been translated after first appearing in Diario El Mundo